eBay plans to expand its eBay Now delivery service

It hardly seems practical for eBay Inc. to deliver goods to shoppers in one hour via courier for $5. But behind the eBay Now service the e-commerce company has been testing since last summer is a much bigger idea: that retail stores and distribution centers can be the key to fast delivery of online orders.

That’s what eBay is testing with the eBay Now service, which it plans to expand this year to new markets, Devin Wenig, president of eBay’s largest business unit, eBay Marketplace, said today. And while he didn’t quite mention Amazon.com Inc. by name, he left little doubt that he was laying out a strategy quite different from Amazon’s approach of building scores of fulfillment centers as the solution to the problem of how to deliver web orders quickly and inexpensively.

Wenig explained today at the annual ChannelAdvisor Catalyst client conference in Las Vegas that eBay recognizes online shoppers want to receive their orders at low cost and with little delay, but doesn’t think building warehouses is the answer. “We know others are taking approach of building a lot of physical presence to fill that gap,” Wenig said in a keynote presentation at the ChannelAdvisor conference. That was a clear reference to Amazon, which, according to ChannelAdvisor CEO Scot Wingo will have 54 fulfillment centers operating across the U.S. by the holiday season.

“We don’t want to do that, we don’t want to build warehouses. We don’t think it’s necessary,” Wenig went on. “We know there is a lot of product out there close to customers, in your stores and warehouses. The innovation is we’re going to try to organize the retail landscape and deliver things quickly without deploying a ton of capital.”

Wenig said eBay soon will expand the eBay Now test from the San Francisco and New York metropolitan areas to Chicago and Dallas “and I would not be surprised if we go further than that.” He also said eBay likely will test the concept outside of the U.S.

What’s more, Wenig said consumers soon will be able to place eBay Now orders on eBay.com, and not just through a dedicated mobile app. Consumers can order items from such retail chains as Toys ‘R’ Us, Best Buy, Home Depot and Target.

Wenig noted that much of the press coverage about eBay Now has focused on the promise of delivery within one hour. But he said it’s not clear consumers will be willing to pay for one-hour delivery, and that it could end up being five-hour or next-day delivery. But the main point, he emphasized, is not the one-hour promise, it’s the delivery model being tested, of making use of merchandise in stores and retail distribution centers. “That model is of organizing the delivery of product already out there in the world and not having to pick it up and forward deploy it in warehouses. You’ll see more of that.”

Wenig spoke Tuesday afternoon, answering questions from ChannelAdvisor CEO Wingo. Earlier in the day, one of Amazon’s top executives, Sebastian Gunningham, senior vice president of seller services had engaged in a similar on-stage conversation with Wingo. ChannelAdvisor assists retailers and manufacturers in selling on online marketplaces, and many of those in attendance sell on Amazon or eBay, or both.

During the conversation, Wenig, who joined eBay in 2011 from business information firm Thomson Reuters, explained that his first year on the job focused on fixing glaring problems, such as a site search feature on eBay.com that more than 15% of the time produced no results. He said eBay was now in the first years of the second phase of his program, which puts a priority on acquiring new customers.

The company reported 116.2 million active shoppers on its marketplace at the end of the first quarter, up 13% from 102.4 million a year earlier. Wenig projected that eBay would have 200 million active customers by the end of 2013, with 40% of the new shoppers coming from such fast-growing economies as Brazil, Russia, India and China, the so-called BRIC nations.

Wenig said eBay plans to expand its Global Shipping Program, which allows U.S. sellers to sell to consumers in 27 other countries as though they were U.S. buyers. The seller ships the product to an eBay warehouse in Kentucky and eBay handles delivery to the customer, including shipping and customs. He said the program would reach 100 countries by the end of the year. “Our mission is simple: open up other markets to U.S. sellers,” he said.

He said the BRIC countries and some others have fast-growing middle classes hungry for Western goods that are often not available. “What lot of these markets need is supply,” Wenig said. “Close that gap and good things happen.”

Russia is serving as eBay’s first test, as the company launched a Russian-language version of eBay there in March, as well as a Russian-language mobile app. The result has been 200% growth in new customer acquisition, Wenig said.

He also touched on eBay’s deal with Chinese online fashion retailer Xiu.com announced last fall that allows eBay merchants to sell through the Chinese e-commerce site. He acknowledged eBay’s previous failure in China—eBay withdrew from that country several years ago after Alibaba Group’s Taobao marketplace emerged as the country’s dominant e-retail site. “We’re not trying to take on Taobao and own the Chinese market,” Wenig said. “We’re trying to establish a beachhead.”

In India, Wenig noted, eBay has a strong market position, but sales and average selling prices are low. Nonetheless, Wenig said eBay’s sales in India have grown 100% a year and he expects e-commerce to spike in India in the coming years. “India will be a massive e-commerce business in five years,” he said. “So I don’t think it’s too early.”